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12 Bank Stocks to Buy and 12 Financial Investments to Sell

One stock market sector that has defied the most disciplined
trading strategy in the last few years has been financials.
Investment in banks and financial stocks changes quickly, but let
me take the guesswork out of investing for this week with 12 hot
financial stocks to buy and 12 stocks to sell that are "dogs with
fleas." Among the favorites on my list the best stocks to buy are
emerging market bank stocks like
BanColombia S.A.
(
CIB
) and regional banks like
First Citizens Bancshares Inc.
(
FCNCA
) and
Signature Bank
(
SBNY
). And right now, most of the worst financial stocks are tied up in
capital markets and Europe financial investments suffering from
sovereign debt problems in Greece, Spain and elsewhere. Stocks to
sell include Netherlands bank
ING Groep N.V.
(
ING
) and Switzerland's
Credit Suisse
(
CS
), along with U.S. investment banks
Charles Schwab
(
SCHW
) and
Northern Trust
(
NTRS
).

This goes to show the strange double-edged sword of financial
stocks and investment strategy tied to this sector. Investment in
banks and financial stocks in the wake of the Lehman Brothers
bankruptcy has been tricky since the failure of Lehman Brothers. On
the other hand, the resurgence of some bank since the lows of 2009
has been dramatic, with massive profits as shares have doubled or
tripled.

So how can you tell the difference between a stock to buy and an
investment to sell? The news is complicated, and may cause your
trading strategy more confusion than clarity. Congress is fresh off
a long Memorial Day weekend recess, and financial regulations are
front and center. At the same time, disgraced financial stock
American International Group
(
AIG
) is deadlocked in negotiations with insurance giant
Prudential
(
PRU
) over the sale of its Asian operations as the company looks to
sell some assets in the wake of the taxpayer bailout prompted by
the financial crisis. To top off the drama for banking stocks, the
number of bank failures is at 78 so far in 2010, on pace to top the
record 140 in 2009 and prompting worries that the FDIC is running
out of money.

My solution to all this is deceptively simple: Look at the
fundamentals of any investment, and the numbers will tell you
whether its a good stock to buy or whether your stock trading
strategy is better served in other opportunities. Let me show you
what I mean with my list of 12 financial stocks to sell now to
protect your money:

Financial Stocks to Sell - 12 Investments to Avoid

Take the giant financial stock
ING
(
ING
). The company was recently downgraded by Keefe Bruyette to "market
perform" from "outperform." And while ING did top Wall Street
estimates in its recent earnings report on May 12, the company is
improving over significant losses in previous quarters and doesn't
have the momentum investors can have confidence in just yet. On top
of that, its exposure to European debt woes -- the Netherlands uses
the euro as its currency -- makes this stock very unpopular with
investors. The result has been a 20% decline in ING stock
year-to-date.

On the investment bank side, let's look at
Northern Trust
(
NTRS
). NTRS provides asset servicing, fund administration and
investment management for both individuals and institutions. You
would think that after the stock market has soared since the 2009
lows that this investment bank would be back on the right track.
Well, not so. Northern Trust earnings recently fell well short of
Wall Street estimates on the first quarter, a at 64 cents a share
instead of a projected 72 cents. That double-digit percentage miss
coupled with a projection of a -11% decline in revenue for the
current quarter has held back this stock. The May 25 initiation of
coverage by Jeffries with a "hold" rating only adds fuel to fire.
This is clearly not an investment to get your money behind.

Hot Bank Stocks to Buy - 12 Investments Worth Your Money

On the other side of the coin, you can see the numbers also back
up my 12 stocks to buy right now. They include smaller banks that
may not be the first investments you think of for your money, but
these emerging market stocks and regional banks are certainly a
good investment in my book.

Take
Annaly Capital Management
(
NLY
), a small real-estate investment trust. On May 7, JMP Securities
upgraded Annaly stock to "market outperform" from "market perform."
The company has seen a number of upward revisions to earnings
estimates in the last month or so, both for its next upcoming
report and for the full year. Stock market analysts never like to
get it wrong, so you can be sure that an improvement in earnings
and revenue estimates for NLY stock means that this is a good
investment in many investors' eyes. To top it all off, this company
is known for its monster dividend yields -- currently calculated
out to a 15% annualized rate based on previous payout history!

The real numbers, however, can be found in emerging market
investments like Latin America banks. Take Argentina stock
Banco Macro
(
BMA
) and Colombia stock
BanColombia
(
CIB
). Both have significantly outperformed the rest of their sector
and the market in general. BanColombia, for instance, is sitting on
a +3% gain year-to-date even as the rest of the U.S. stock market
has slipped by the same amount. That's because both stocks have
consistently grown revenue and earnings in recent quarters. BMA
stock has seen four consecutive quarters of earnings growth and
three-straight earnings surprises -- the largest of which came last
quarter with a +35% earnings beat for this Argentina stock.
BanColombia has done just as well, with three consecutive quarters
of earnings growth and four consecutive earnings surprises, the
largest of which topped +28%.

You can see why I'm so bullish on these financial investments
right now. If you look closely at the numbers for the rest of this
list of stocks to buy, you'll see similar evidence of success. Here
they are:

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